The euro is flat on Wednesday, placing the brakes on a nasty four-day slide. EUR/USD dipped under the 1.09 line within the Asian session earlier than recovering.
ECB’s Panetta warns about stagflation
Inflation has been skyrocketing within the US and UK, giving the Fed and BoE loads of sleepless nights. I’m unsure if ECB President Lagarde is overly distraught about inflation, as she has repeatedly dismissed inflationary pressures as being transient. Simply to refresh the readers’ reminiscences, Fed Chair Powell sang the transient tune for months earlier than famously “retiring” this stance as inflation saved on steaming forward. Lagarde has insisted that the ECB is not going to tighten its coverage, despite the fact that it will likely be out of sync with the Federal Reserve, which has launched into a rate-tightening cycle.
ECB member Fabio Panetta weighed into the dialogue over tightening on Tuesday. Panetta warned towards elevating charges, saying that eurozone development might contract this 12 months, and better charges to fight inflation might injury the economic system. With eurozone inflation at a record-high 7.5%, there have been calls from some ECB members to lift charges with a view to curb inflation, however Panetta’s argument touched on the priority that with a really actual threat of stagflation, elevating charges might do extra hurt than good.
Fed President Lael Brainard made some hawkish feedback on Tuesday, which despatched US yields larger and prolonged the euro’s downswing. Brainard mentioned that the Fed might begin reducing its stability sheet, often known as quantitative tightening, as early as April. Brainard additionally mentioned that the Fed was ready to take “sturdy motion” to fight excessive inflation. Brainard’s feedback have been noteworthy in that Brainard is taken into account one of the vital dovish FOMC members. The Fed is clearly in hawkish mode, and Esther George, one other Fed president, mentioned that 50-basis level hikes could be an possibility that the Fed would “have to think about”.
- EUR/USD is testing resistance at 1.0936. Above, there may be resistance at 1.1060
- There are help ranges at 1.0820 and 1.0696